AI Drafter 
TaxTMI 
TaxTMI 
2021 (11) TMI 134
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....2. The issues being common, interlinked and similar and arising from a common order of CIT(A), all the captioned Revenue's appeals in respect of the captioned assessee have been heard together and are being disposed of by this common order. 3. As per its grounds of appeal, the Revenue has broadly challenged the relief granted by the CIT(A) on; (1) additions of Rs. 1,25,00,000/- (A.Y. 2006-07), Rs. 3,75,00,000/- (A.Y. 2009-10), (3) Rs. 5,45,00,000/- (A.Y.2010-11) & Rs. 70,00,000/- (A.Y. 2011-12) carried out by the AO under the provisions of Section 68 of the Act in respect of receipt of share application/share capital. 4. As per its cross objections for the various assessment years in question spanning over A.Ys. 2006-07, 2009-10 to 2011-12, the assessee has assailed the order of CIT(A) on the point of jurisdiction and primarily raised a legal objection that the jurisdiction of the AO gets ousted under s.153A of the Act in so far as the addition unconnected to the incriminating material in respect of unabated and concluded assessments concerning A.Ys. 2006-07 to 2009-10 are concerned. Additionally, the assessee has also simultaneously supported the action of the CIT(A) in reve....
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....ave carefully gone through the assessment order and submissions of the appellant. As regards allegation of the A. O. regarding non- maintenance of Statutory Records, the appellant was asked to furnish the copy of statements recorded during the course of proceedings u/ s 132, it has been submitted by the appellant that the statement of none of the appellant company' s representative was recorded and it has also been submitted by the appellant that none of the Officer of Search Team ever visited the Registered Office premises of the appellant company. With a view to ascertain the facts, during the course of appellate proceedings of other companies covered in the Mahamaya Group of cases and in appeal before the undersigned, namely (1) Mahamaya Steel Industries Limited, (2) Abhishek Steel Industries Limited, (3) Devi Iron & Power Private Limited and (4) Shree Shyam Sponge & Power Limited, were asked to furnish copy of statements of all the persons recorded by the Search Team during the proceedings u/ s 132. The statements were furnished by the said companies. I have carefully gone through all the statements of all the persons recorded during the proceedings u/ s 132 on 21/ 22. 06. 2011....
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.... Escort Finvest Private Limited was refunded in the F. Y 20012- 13 through account payee cheque, the appellant submitted the ledger of said company to substantiate its submission. I have verified the factum of refund from the ledger placed in Page No. 15 of Volume 3 of the Paper book, I am convinced that the appellant did refund the said sum to Escort Fivnest Private Limited was refunded in the F. Y 2012- 13. I find that in Commissioner of Income- tax, Rajkot- I v. Ayachi Chandrashekhar Narsangji. [2014] 42 taxmann. com 251 (Gujarat), it was held that " It is required to note that as such an amount of Rs. 1,00,00,000 vide cheque No. 102110 and an amount of Rs. 60 lakhs vide cheque No. 102111 was given to the assessee and out of the total loan of Rs. 1.60 crores, Rs. 15 lakhs vide cheque no. 196107 was repaid and therefore, an amount of Rs. 1,45,00,000 remained outstanding to be paid to IA. It has also come on record that the said loan amount has been repaid by the assessee to ' IA' in the immediately next year and the Department had accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that t....
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....orts Finvest Private Limited. Furthermore, I find that the said investor company was in existence even prior to the period covered under the present search assessment proceedings, therefore, even assuming without accepting the contention of the A. O., no undisclosed income can be added in the present search assessment proceedings as the same are beyond the period covered under the present search assessment proceedings. 5.4 It is also seen that the appellant was assessed in the past and case of assessment year 2006- 07 and 2007- 08 was under scrutiny assessment u/ s 143(3) and in the said assessment proceedings, the addition to share application/share capital was duly accepted as genuine. 5.5 It is seen that the addition to share application and capital was duly accepted in the scrutiny assessment proceedings, the present action of the A. O is not culminating from any specific finding against the appellant that it was a beneficiary of any racket which has been unearthed as a result of search proceedings nor has the A. O brought on record any other evidence to indicate that the appellant did make undisclosed income and such evidence came on the surface as a result o....
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....on as unexplained cash credits, the AO has heavily relied upon the judicial pronouncements, however, the appellant has made elaborate submissions distinguishing the facts, I am convinced with the explanation of the appellant that the decisions relied upon by the A. O are not applicable in the facts of the present case as there is nothing on record which can indicate that the receipt of share application money was by way of accommodation entries only. It is also not the case of the A. O that the investors have accepted by way of statement that the sums paid to the appellant was in fact received from the appellant and investors merely routed the undisclosed income of the appellant through money laundering process in the form of share application money. On the contrary, the A. O himself has stated in the assessment order that the investors have sent confirmatory letters, I have gone through the confirmatory letters, it is seen that the letters were sent through registered/ speed post which cannot be said to be unauthentic mode, secondly, the investors have confirmed having made the investment by way of affidavits which are duly notarized, the investors have also furnished the copies o....
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....eported in 216 CTR 195 and the jurisdictional High Court viz. the Chhattisgarh High Court in the case of the ACIT vs. Venkateshwar Ispat (P) Ltd. reported in 319 ITR 393 for the reason that the facts in such cases are entirely same, particularly, when no differentiation could be effectively demonstrated and brought on to the record by the A. O. The submissions of the AO that the decision of the Hon'ble Supreme Court in the case of Lovely Exports (P) Limited was rendered in the light of different facts inasmuch as the said judgement was rendered by the Hon'ble Supreme Court in the context of public issue, is devoid of merit because the decision was rendered by the Hon'ble Supreme Court in the case of Lovely Exports (P) Ltd. which is a Private Limited Company and which cannot bring public issue of shares. I find that the investments made by the share applicants were duly reflected in the audited financial statements of the corporate investors. It is a settled principle of law that reason for suspicion, however grave it may be, cannot be a basis for holding adversity against appellant. 5.10 The Assessing Officer has disregarded the documentary evidences adduced by the appella....
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.... Ors. (2012) 68 DTR (Del) 38; b) Commissioner of Income- tax v. HLT Finance (P.) Ltd. [ 2011] 12 taxmann. com 247 (Delhi); c) Commissioner of Income- tax- IV v. Dwarkadhish Investment (P.) Ltd. [ 2010] 194 TAXMAN 43 (DELHI); d) Commissioner of Income- tax v. Winstral Petrochemicals (P.) Ltd. [ 2011] 10 taxmann. com 137 (Delhi); e) Commissioner of Income- tax v. Arunananda Textiles (P.) Ltd. [ 2011] 15 taxmann. com 226 (Kar.); f) Commissioner of Income- tax v. Creative World Telefilms Ltd. [ 2011] 15 taxmann. com 183 (Bom.); 5.13 The A. O has relied upon the decision in CIT v. Nova Promoters & Finlease (P) Ltd. [ 2012] 342 ITR 169/ 206 Taxman 207/ 18 taxmann. com 217 (Delhi). However, on going through the said decision in Nova Promoters & Finlease (P) Ltd. (supra) I find that the facts are clearly distinguishable. In fact, in Nova Promoters & Finlease (P) Ltd. (supra) itself the Hon'ble Delhi High Court has observed, in the context of Lovely Exports (P) Ltd. (supra), as under:- " The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that wh....
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....nds support from the following judicial pronouncements:- (a) Commissioner of Income- tax- III v. Namastey Chemicals (P.) Ltd. [ 2013] 33 taxmann. com 271 (Gujarat); (b) Commissioner of Income Tax v. Kuber Ploritech Ltd. [ 2010] 2 DTLONLINE 136 (DELHI); (c) Commissioner of Income- tax v. Tania Investments (P.) Ltd. IT Appeal No. 15 OF 2009, Hi HHHigh Court of Mumbai; (d) Bhav Shakti Steel Mines (P.) Ltd. v. Commissioner of Income- tax [ 2009] 179 TAXMAN 25 (DELHI); (e) Commissioner of Income- tax v. Samir Bio- Tech (P.) Ltd. [ 2010] 325 ITR 294 (DELHI) (f) Commissioner of Income- tax- I v. Micro Melt (P.) Ltd. [ 2009] 177 TAXMAN 35 (GUJ.) (g) Commissioner of Income- tax- V v. Real Time Marketing (P.) Ltd. [ 2008] 173 TAXMAN 41 (DELHI) (h) Assistant Commissioner of Income- tax v. Mansarovar Urban Co- Operative Bank Ltd. [ 2009] 124 TTJ 269 (LUCKNOW); (i) Commissioner of Income- tax - IV v. Empire Buildtech (P.) Ltd. [ 2014] 43 taxmann. com 269 (Delhi); (j) Commissioner of Income- tax v. Mulberry Silk International Ltd. [ 2012] 19 taxmann. com 31 (Kar.); (k) Commissioner of Income- tax- ....
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....x, the legal objection of the Assessee on point of jurisdiction under S. 153A to assess the income without showing any nexus with any incriminating document found in search in respect of unabated assessments AY 2006-07 to 2009-10, was however seen with disfavour and decided against the assessee by the CIT(A). 10. The Revenue is aggrieved by the relief granted to the assessee on merits by the CIT(A). 11. The Assessee, on the other hand, has also filed cross objections challenging the very legitimacy of additions/ disallowances dehors any reference to incriminating documents in unabated assessments i.e. AY 2006-07 to AY 2009-10. 12. When the matter was called for hearing, the learned CIT-DR for the Revenue, at the outset, strongly relied upon the factual matrix discussed in assessment order for various assessment years in question. However, the view of the CIT(A) on the legal objection of the Assessee was defended vociferously. It was contended by the Revenue that discovery of any incriminating document is not a condition precedent to make additions or disallowance under s.153A of the Act. It was thus contended that the AO and the CIT(A) rightly observed that the issue of wa....
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.... search action was carried out at the registered office of the assessee company where the share certificates, relevant statutory records are kept as required in law. No adverse information in relation to share applicants were found in the course of search. No queries were raised towards the statutory records being kept under Company Law. It was further asserted that no document relating to various assessment years in question were either found or seized which can be branded to be incriminating in nature indicating presence of any undisclosed income by way of share application in question. The cash found in search was meager having regard to the scale of operations. The documents found and seized were of routine nature maintained in the ordinary course of business which naturally will be found in the business premises. The documents found relates to the entries already recorded in the books. Hence, the assessments for AYs 2006-07 to 2009-10 which stood concluded and remained unabated is barred by principles of finality and could not be disturbed by the AO in the absence of the incriminating material. 13.2 To buttress the legal position that presence of incriminating material disc....
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..... ACIT, (2019) 56 CCH 0435, ITAT Delhi Bench; (k) Commissioner of Income Tax Vs. Deepak Kumar Agrawal & Ors., (2017) 398ITR586 (Bom); (l) PCIT Cental- 3 Vs. Anand Kumar Jain, TS- 105- HC- 2021 (Del); (m) Principal Commissioner of Income Tax Vs. Dipak Jashvantlal Panchal,(2017) 397 ITR 153 (Guj); (n) Rajat Minerals (P) Ltd. vs. DCIT (2020) 114 taxmann. com 536 (Ranchi) 13.3 On merits, the learned Counsel submitted that it is a matter of record that assessee has filed several documentary evidences of subscribers before the AO to support the nature and source of share application money: (a) PAN, Address, Name (b) COI, MOA, AOA (C) Audited Financial Statement (d) Income Tax Return (e) Bank Statement (f) Share Application Form (g) Payment received through banking channel (h) Details of payment received 13.4 Moving further, the learned counsel adverted to page nos. 243-245 of the paper book and submitted that the assessee has made several pro-active requests before the AO during the assessment proceedings some of which are noted hereunder as referred; "(a) To provide....
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....s the very foundation of additions in dispute. The legal question that arises as per cross objection is whether while making assessment under s.153A of the Act, the Revenue is entitled to interfere with an already concluded (and not abated) assessment passed either under s.143(1) of the Act or under s.143(3) of the Act and not pending at the time of search, in the absence of incriminating documents unearthed as a result of search? As a corollary, the scope and ambit of assessment proceedings in search cases under s.153A of the Act is put under scanner. 14.2 In the first appeal, the CIT(A) dismissed the legal ground of jurisdiction by observing as under: "8. I have carefully gone through the assessment order and submissions of the appellant. Where a search has been initiated u/ s 132 of the Act, the A. O. is entitled to issue notice for six assessment years immediately preceding the year in which search has been initiated. As such, the assessment for those six assessment years stands reopened. Once the assessment is reopened, the A. O. has full powers to assess the income which has escaped, whether found as a result of search or otherwise. Accordingly, the additions made....
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....search and in the absence of any incriminating evidence found or seized during search has been endorsed by the Hon'ble Gujarat High Court in Pr.CIT vs. Sunrise Finlease (P.) Ltd. (2018) 89 taxmann.com 1 (Guj.). 14.3.3 The Hon'ble Gujarat High Court in Pr.CIT vs. Saumya Constructions Pvt. Ltd. (2016) 387 ITR 529 (Guj) also declined to agree with the plea on behalf of the Revenue that the new procedure provided under s.153A of the Act is different from earlier procedure provided under s.158BC r.w.s. 158BB of the Act and consequently, the plea of the Revenue that there is no condition in Section 153A of the Act that additions should be made strictly on the basis of evidence found during the course of search was not approved. The Hon'ble Gujarat High Court analyzed the position of law and took note of several judicial precedents and concluded that completed assessments can be interfered with by the AO while making the assessment under s.153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents etc. The Hon'ble Gujarat High Court noted that the trigger point for exercise of powers under s.153A of the Act is a va....
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.... s.153A of the Act is limited to the incriminating evidence found during the search in so far as unabated assessments are concerned; the issues unconnected to incriminating material are insulated from examination in the proceedings under S. 153A in respect of such concluded assessments & (ii) unless there is incriminating material qua each assessment years to which additions are sought to be made in respect of concluded assessments, the assessment under s.153A of the Act by making additions/disallowances would be vitiated in law. 14.5 As discussed in length, the issue has been dynamic and a matter of legal interpretation. We are governed by the schematic interpretation given to provisions of Section 153A of the Act by different Hon'ble Courts. In the light of judicial fiat reading down the scope and spectrum of assessment under s.153A of the Act in narrower compass, the position of law is explicitly clear. In the absence of any connection with the incriminating material unearthed in search proceedings of assessee, additions in respect of concluded assessment i.e. AYs. 2006-07 & 2009-10 in instant appeals, are not permissible in law. The burden of proof towards existence of undis....
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.... oral & written submissions made on behalf of the assessee, found substantial merits in the plea of the assessee and reversed the additions so made. 17.1 The CIT(A) has succinctly analyzed the issue. The detailed findings of the CIT(A) dealing with the issue has been reproduced in the preceding paragraph 9 of this order. 17.2 On perusal of the order of the CIT(A), it is noticed that CIT(A) has recorded a finding on fact that additions on account of share application money has been made without any reference to the incriminating material detected in the course of search. The CIT(A) has recorded some noticeable observations on the issue of share application money as summarized hereunder: " The A. O. did not pay any heed to the requests seeking supply of results of inquiry conducted if any for arriving at such conclusions. Furthermore, the Ld. ARs pointed out that assessments in the case of promoters/ directors and family members were made in most of the cases but no such view even to support his own passing remarks was offered. Detailed explanations were submitted with respect to the loose papers seized and not even a single document out of it relate to or suggest that....
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....stment was thus found to be explained satisfactorily in the facts of the case. It was further noted that the credit for share application money was accepted in the regular assessment under s.143(3) of the Act in the hands of the Assessee concerning A.Y. 2006-07 prior to search after making due enquiries. Besides, the subscriber co. namely Escort Finvest Pvt. Ltd. providing share application money in AY 2009-10; 2010-11 & 2011-12 aggregating to Rs. 9.90 crore was found to be a group company. A pertinent observation was made that the same AO in the case of other group concern (Mahamaya Steel Industries Ltd.) accepted the creditworthiness of the investor company namely 'Escorts Finvest Pvt. Ltd.' for subscription in Pref. Share Capital. The CIT(A) essentially noted that a substantial part of application money has been received from Escorts (a group co.) which was subsequently refunded in FY 2012-13. The adverse inference drawn by the AO was found by the CIT(A) to be unsubstantiated and in the realm of suspicion, surmises and conjectures. On legal position, the CIT(A) has referred to large number of judicial pronouncements. 17.4 As pointed out, the share application money was refund....
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....r had also made investment in the preference share capital of group company namely Mahamaya Steel Industries Limited (MSIL) and the search assessment of MSIL was also completed simultaneously by the same AO wherein no adverse inference was drawn in respect of preference raised by the MSIL from the aforesaid applicant. As regards the creditworthiness, it was pointed out that net worth of EFPL as on 31.03.2012 stands at Rs. 51.77 Crores. Similar net worth in the vicinity of Rs. 50 Crores or thereabout is enjoyed by the subscriber at least from F.Y. 2006-07 onwards. The proposed subscriber has also confirmed the act of proposed investments in the assessee company as noted earlier. The share applicant also offered for personal appearance before the AO and to give statement on oath before the AO which request however was not acted upon by AO. This apart, an affidavit was filed by the subscriber stating factum of investment. In short, it is asserted that the primary onus was discharged to explain the nature and source of the money received. Further, it is contended that no legal obligation is prescribed upon assessee in law to prove the 'source of source' of such receipts in view of the ....